Sterling Outshines G10 Rivals Despite Limited Data – Scotiabank

The Pound is showing some real grit today, edging up against the dollar and standing tall among its G10 peers as we roll into Thursday's North American session. With hardly any significant data releases to speak of, this modest rally seems to stem from the market getting over Tuesday's fiscal jitters, according to Shaun Osborne and Eric Theoret at Scotiabank.

Fiscal Concerns Easing, But Budget Challenges Loom

"Looking ahead isn't exactly smooth sailing with markets eyeing that November 26 budget and what it means for growth," they note. "But the expected fiscal belt-tightening has actually bolstered market confidence and should help contain that recent spike in borrowing costs."

I've got to say, it's pretty remarkable how quickly markets forgive and forget these days. One moment we're panicking about fiscal policy, the next we're back to business as usual!

Rate Differentials Supporting Sterling

"The gap between UK and US 2-year yields is hitting fresh highs we haven't seen since October, giving the pound a nice cushion. Just like with the euro, traders are gradually backing away from aggressive rate cut bets, which gives sterling some breathing room as cuts get priced out."

This is exactly why I've been bullish on sterling lately. Everyone was so quick to assume the Bank of England would slash rates, but they've completely underestimated the inflation stickiness in the UK economy. Classic market shortsightedness!

Technical Picture Shows Congestion

"The RSI's bounced back to 50 and that 50-day moving average at 1.3483 is acting like a magnet for short-term price action. This week's candles show clear support below 1.3400, while upside resistance doesn't look too formidable until we hit 1.3600. We're expecting a range between 1.3400 support and 1.3500 resistance for now."

Honestly, this consolidation phase is getting boring. The pound needs to either break higher or dump - this sideways chop is just bleeding out traders on both sides. Where are the volatility spikes we used to see in cable?

The current exchange rate stands at 1.34814, up 0.27% on the day. While modest, this gain stands out against the backdrop of broader G10 weakness against the greenback amid ongoing US government shutdown concerns and OPEC+ meeting anticipation.

Disclaimer: For information purposes only. Past performance is not indicative of future results.